Securities are stocks, bonds and debentures issued by corporations and governments to evidence ownership and terms of payment of dividends or final pay-off. These are called securities because the assets and/or the profits of the corporation or the credit of the government stand as security for payment. However, unlike secured transactions in which specific property is pledged (like a mortgage or car), securities are only as good as the future profitability of the corporation or the management of the governmental agency.
At their most basic, securities are any type of tradable asset. They can be broadly defined as one of three types of securities:
The securities market is highly regulated by both state and federal law, and noncompliance could have significant civil or even criminal penalties. The federal agency responsible for the promulgation and enforcement of securities is the Security and Exchange Commission (SEC) which was established by the Securities Exchange Act of 1934. The other two main federal laws are the Investment Company Act of 1940 (“Investment Company Act”), and the Investment Advisers Act of 1940 (“Advisers Act”).
In addition to the federal laws, there are also state laws that govern securities. These laws are commonly known as Blue Sky Laws, which typically provide an investor who loses money or is defrauded in the securities markets far greater protections than are available under the federal laws. Securities attorneys represent people and companies in both transactional and litigation capacities, and also provide legal counsel to ensure that investors are in compliance with the applicable state and federal law.
Complaints against brokers hit an all-time high of 8,945 in 2003 as a result of the industry’s scandals, including shoddy Wall Street research, unethical accounting practices, illegal fund trading schemes, fund breakpoint failures and questionable mutual fund sales practices. The SEC is in the midst of a complete examination of how funds are sold and how firms and their brokers are compensated. The National Association of Securities Dealers is currently investigating the appropriateness of fee-based accounts and variable annuities sales, common practices not likely to change anytime soon.
As a result of the increasing numbers of complaints and ever-changing and complicated regulatory schemes, stock brokers, brokers, brokerage firms and others in the securities industry should retain the services of a securities law attorney immediately. A skilled securities attorney can help avoid legal problems before they develop. Investors should also retain the services of a securities attorney to advise them on their legal rights in investing before considering an investment. Use the search form on this page to find a securities law attorney that’s right for you and your legal situation.